B    3    814    05fl 


GIFT  OF 


AGRIC. 
LIBRARY 


SUMMARY  Oljf' B^Xr 
REPORT 


OF  THE 


FEDERAL  TRADE  COMMISSION 


ON 


COMMERCIAL  FEEDS 


MARCH  29,  1921 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1921 


SUMMARY  OF 
REPORT 


***.! 

OF  THE 


.  FEDERAL  TRADE  COMMISSION 


ON 


COMMERCIAL  FEEDS 


MARCH  29,  1921 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1921 


-U 


FEDERAL  TRADE  COMMISSION. 


HUSTON  THOMPSON,  Chairman. 
NELSON  B.  G  A  SKILL. 
JOHN  GARLAND  POLLARD. 
VICTOR  MURDOCK. 
JOHN  F.  NUGENT. 

J.  P.  YODER,  Secretary. 


LETTER  OF  SUBMITTAL. 


FEDERAL  TRADE  COMMISSION, 

Washington,  March  29, 
To  the  President  of  the  Senate  of  the  United  States. 

SIR:  There  is  transmitted  herewith  in  response  to  Senate  resolu- 
tion 140,  July  31,  1919,  a  report  on  the  manufacture  and  sale  of  com- 
mercial feeds. 

Commerce  in  animal  feeds  has  grown  enormously  in  recent  years. 
This  has  been  due  in  part  to  the  greater  knowledge  of  feed  values 
and  of  the  varied  requirements  of  live  stock.  Many  of  the  feeding- 
stuffs  now  widely  used  are  by-products  which  were  formerly  wasted. 

Farmers  and  feeders  may  purchase  their  feed  requirements  in  the 
form  of  ready-mixed  feeds  or  they  may  buy  the  separate  commodi- 
ties and  do  their  own  mixing.  The  Federal  and  State  Departments 
of  Agriculture,  the  agricultural  colleges,  their  staffs  and  other  au- 
thorities render  valuable  assistance  to  farmers  by  advice  on  feeding 
problems,  especially  with  reference  to  feed  values  and  mixing  their 
own  rations. 

An  investigation  of  the  animal-feeds  industry  to  be  complete  in- 
volves a  study  of  practically  every  industry  which  uses  in  its  manu- 
facturing processes  vegetable  material  and  some  which  use  animal 
material.  The  by-products  of  all  these  industries  supply  a  large 
number  of  different  kinds  of  feedingstuffs.  In  addition  to  these 
feeds  there  are  numerous  others  which  are  not  the  result  of  manufac- 
turing processes.  It  follows,  therefore,  that  to  make  a  thoroughly 
comprehensive  investigation  of  animal  feeds  would  involve  a  study 
of  the  manufacturing  processes  and  of  results  in  a  large  number  of 
industries  which  produce  as  by-products  materials  suitable  for  feeds. 
Some  indication  of  the  ramifications  of  the  feedingstuffs  industry 
may  be  appreciated  from  the  following  general  classification  of  feed- 
ingstuffs : 

1.  The  hays  and  straws.  2.  The  whole  cereal  grains.  3.  Cereal 
mill  by-products.  4.  Starch  and  glucose  by-products.  5.  Brewery 
and  distillery  by-products  and  yeast  and  vinegar  by-products.  6. 
Oil-mill  by-products.  7.  Sugar  by-products.  8.  Animal  and  fish 
by-products.  9.  Miscellaneous  feeds.  10.  Commercial  mixed  feeds 
or  proprietary  feeds.  11.  Condimental  stock  remedies  or  tonics. 

The  American  Feed  Manufacturers'  Association  has  listed  over 
3,000  manufacturers  of  commercial  mixed  feeds,  and  the  president 
of  this  association  stated  that  this  is  very  likely  less  than  half  of 
the  total  number.  As  a  result  of  the  foregoing  facts  it  will  be  ap- 
preciated that  anything  like  a  complete  survey  of  the  feedingstuffs 
industry  would  involve  an  enormous  expenditure  of  time  and  money. 
Under  these  circumstances  the  inquiry  was  confined  to  a  study  of  rep- 
resentative feeds  which  enter  into  commerce  and  covers  the  period 
from  1913  to  1920,  inclusive. 

3 

444094 


SUMMARY   OF   REPORT    OX    COMMERCIAL   FEEDS. 


is. a. ;gre£t -lack  of  authoritative  data  in  regard  to  many 
phases  .of.  the.  industry  and  there  are  numerous  questions  confronting 
tins  pusirie^s;  whicji  are.  highly  controversial.  This  is  particularly  the 
case  'with  reference  to  the  feed  value  of  certain  products  commonly 
known  as  roughages  or  low-grade  feeds.  It  is  contended  by  some 
agricultural  authorities  and  a  few  feed  manufacturers  that  the  use 
of  certain  of  these  low-grade  feedingstuffs  should  be  restricted,  since, 
it  is  alleged,  these  feedingstuffs  are  roughages  of  which  farmers  pro- 
duce, or  should  produce,  an  abundance.  It  is  also  frequently  alleged 
that  mixed  feeds  containing  one  or  more  of  such  low-grade  in- 
gredients are  sold  at  prices  out  of  line  with  their  feed  value.  A  num- 
ber of  plans  have  been  suggested  to  check  the  use  of  these  commodi- 
ties, the  most  common  one  being  the  proposal  to  require  the  state- 
ment on  tags  and  labels  of  the  percentage  of  each  ingredient  used. 
However,  important  objections  have  been  offered  against  the  adop- 
tion of  such  a  requirement. 

The  study  of  the  prices  of  feeds  is  attended  with  considerable 
difficulty.  In  particular  the  comparison  of  the  prices  of  commercial 
mixed  feeds  with  one  another  or  with  the  prices  of  the  straight 
feeds  from  which  they  are  made  is  difficult.  This  will  readily  ap- 
pear when  the  great  number  of  ingredients  which  enter  into  many 
brands  of  mixed  feeds  are  considered,  and  also  the  very  frequent 
changes  in  formulas  of  many,  if  not  mos.t,  of  these  feeds.  Hence 
no  such  precision  is  to  be  looked  for  in  conclusions  derived  from  a 
study  of  prices  of  these  feeds  as  is  possible  in  the  study  of  prices  of 
fairly  homogeneous  commodities. 

Prices  of  all  kinds  of  feeds,  both  the  so  called  straight  feeds  and 
the  ready-mixed  feeds,  in  common  with  the  prices  of  practically  all 
other  commodities,  increased  greatly  during  the  war  period  and 
for  more  than  a  year  and  a  half  following  the  armistice.  Most  feeds 
reached  their  highest  prices  in  May  or  June,  1920.  There  were 
naturally  considerable  differences  in  the  movement  of  prices  of 
different  feeds,  due  to  their  great  variety  and  the  different  sources 
from  which  they  are  derived,  there  being  at  times  a  plentiful  supply 
of  some  feeds,  accompanied  by  scarcity  of  others.  Demand,  too, 
naturally  fluctuates,  but  the  price  of  every  feed  depends  in  some 
measure,  greater  or  less,  on  the  prices  of  other  feeds,  on  account  of 
the  relative  ease  with  which  one  feed  can  be  substituted  for  another 
within  fairly  wide  limits. 

One  of  the  most  important  influences  affecting  prices  during  the 
war  and  much  of  the  time  since  the  armistice  has  been  the  shortage 
of  freight  cars,  which  has  not  only  delayed  shipments  of  finished 
products  but  often  held  up  receipts  of  raw  materials.  At  times  this 
shortage  has  been  acute  and  has  caused  decreased  production.  This 
condition,  of  course,  has  not  been  peculiar  to  the  feed  business. 

The  wholesale  prices  of  10  important  straight  feeds  and  12  com- 
mercial mixed  feeds,  which  as  a  whole  may  be  considered  repre- 
sentative, respectively,  of  these  two  classes,  were  compared  with  the 
composite  wholesale  prices  of  a  group  of  32  farm  products  and  of  all 
commodities,  as  registered  by  index  numbers  compiled  by  the  Bureau 
of  Labor  Statistics  of  the  Department  of  Labor.  These  index  num- 
bers give  the  prices  of  these  groups  of  commodities  by  months  and 
years  relative  to  the  average  price  of  the  year  1913  taken  as  a  base. 


SUMMARY   OF   REPORT   OX   COMMERCIAL  FEEDS.  5 

Composite  index  numbers  were  also  computed  for  the  group  of  10 
representative  straight  feeds  and  the  group  of  12  commercial  mixed 
feeds. 

A  comparison  of  these  different  series  of  index  numbers  shows 
that  the  price  of  all  commodities  in  1919  was  represented  by  212 
as  compared  with  the  base  price  of  100,  or  the  average  price  of  the 
year  1913.  The  other  index  numbers  for  the  year  1919  were  as 
follows :  Farm  products,  234 ;  straight  feeds,  236 ;  ready-mixed  feeds, 
220.  There  was  a  very  close  correspondence  in  the  relative  increase 
in  prices  of  mixed  feeds  and  farm  products,  and  also  a  rather  close 
correspondence  for  straight  feeds.  The  relative  advance  in  prices 
from  1913  to  1919  in  the  two  classes  of  feeds  and  also  in  farm  prod- 
ucts was  considerably  higher  than  in  all  commodities. 

The  prices  of  feeds  as  well  as  of  "  all  commodities  "  continued  to 
advance  during  the  first  half  of  1920,  but  the  second  half  of  the 
year  was  marked  by  a  very  great  decline  in  the  prices  of  all  feeds, 
both  straight  and  ready  mixed.  The  decline  between  June  and 
December  was  as  much  as  57  per  cent  for  some  of  the  straight  feeds. 
Different  brands  of  mixed  feeds  declined  in  price  from  20  per  cent  to 
more  than  50  per  cent. 

So  far  as  general  conclusions  can  be  drawn  from  the  study  of  the 
statistics  of  feed  prices  the  figures  do  not  indicate  a  disproportionate 
rise  in  these  prices  as  compared  with  farm  products  in  general. 

A  study  of  the  costs  and  profits  of  a  representative  group  of /line 
mixed-feed  manufacturers  during  1915-1919  shows  that  during  the 
period  costs  of  materials  about  doubled,  while  with  few  exceptions 
all  other  items  of  manufacturing  costs  and  expenses  increased  in 
about  the  same  proportion.  Since  the  average  cost  of  raw  materials 
for  the  period  1915-1919,  inclusive,  was  about  83  per  cent  of  the 
commercial  cost  of  sales  and  about  80  per  cent  of  the  selling  price, 
this  would  indicate  that  by  far  the  largest  factor  causing  the  high 
prices  of  ready-mixed  feeds  in  1919  was  the  great  increase  in  the 
cost  of  raw  materials. 

The  net  operating  profit  of  these  mixed- feed  manufacturers  was 
sufficient  to  net  a  fairly  high  rate  of  return  on  the  investment  in  each 
year,  while  in  1917  and  1919  the  rate  of  return  was  considerably 
larger,  due  probably  in  part  to  the  fact  that  in  these  two  years  the 
net  operating  profit  included  some  profit  realized  from  an  increase 
in  value  of  raw  materials  during  .their  period  of  conversion  into 
mixed  feeds.  The  average  rate  of  return  for  the  period  1915-1919 
was  18.77  per  cent.  The  percentages  represent  the  profits  on  the  total 
investment  employed  in  the  business,  which  includes  borrowed 
capital.  The  rates  of  return  would  be  greater  on  the  capital  stock 
and  surplus,  which  is  the  net  investment  of  the  companies. 

On  the  whole,  competition  in  this  industry  is  very  active.  It  is 
true  that  there  were  indications  that  prices  had  been  discussed  by 
members  of  the  American  Feed  Manufacturers'  Association  at  or  im- 
mediately following  certain  meetings  of  the  executive  committee.  In 
1919  also  an  attempt  was  made  by  certain  members  of  this  association 
to  organize  a  bureau,  which  seems  to  have  had  price  fixing  as  an 
object,  but  this  organization  was  never  completed.  Although  a  care- 
ful examination  was  made  of  the  correspondence  files  of  various  as- 
sociations in  the  feedingstuffs  industry  and  of  a  number  of  important 


6  SUMMARY   OF   REPORT   OX   COMMERCIAL   FEEDS. 

feed  manufacturers,  no  indications  were  found  of  any  concerted 
action  to  advance  prices.  Although  the  discussions  of  prices  above 
referred  to  may  have  tended  to  advance  prices,  no  evidence  was 
found  to  establish  this.  On  the  whole,  as  already  indicated,  the 
evidence  obtained  in  the  inquiry  indicates  a  very  sharp  competition 
in  the  manufacture  and  sale  of  feedingstuffs. 

The  distribution  of  three  important  feed  commodities,  corn  glu- 
ten feed,  cane  blackstrap  molasses,  and  dried  beet  pulp,  is  in  each 
case  in  the  hands  of  a  few  concerns.  This  does  not  appear,  however, 
to  exclude  competition  in  these  commodities,  nor  does  there  appear 
to  be  any  collusion  or  combination  between  the  manufacturers  in  any 
one  of  the  three  groups. 

A  number  of  manufacturers  grant  overages,  i.  e.,  a  commission 
to  old  dealers  on  feeds  sold  to  new  dealers  in  the  former's  territory. 
It  is  possible  that  this  may  be  a  price  discrimination,  and  the  Com- 
mission has  taken  steps  to  determine  whether  it  is  in  violation  of 
section  2  of  the  Clayton  Act  or  section  5  of  the  Federal  Trade  Com- 
mission Act. 

The  use  of  alternate  or  different  brand  names  for  the  same  feed 
may  be  unfair  unless  the  use  of  such  alternate  brands  is  fully  under- 
stood by  the  dealer  and  the  consumer.  In  any  case  it  leads  to  an 
undue  multiplication  of  brands,  and  it  is  questionable  whether  it  is 
desirable  from  an  economic  standpoint. 

WJiile  the  Eastern  Federation  of  Retail  Feed  Merchants  is  opposed 
to  direct  selling  to  consumers  by  manufacturers,  such  opposition, 
according  to  a  careful  examination  of  this  association's  records,  is  in 
the  nature  of  the  "  educational  argument "  and  not  by  boycott  or 
threats  of  boycott. 

Animal  feeds  are  subject  to  regulation  by  practically  all  States 
and  by  the  Federal  Government.  This  regulation  was  found  to  be 
necessary  because  fraudulent  practices  such  as  adulteration  and  mis- 
branding  were  at  one  time  quite  common.  The  enactment  and  en- 
forcement of  feed  laws  by  the  various  States,  however,  has  un- 
doubtedly resulted  in  great  improvement  so  far  as  these  practices 
are  concerned. 

In  most  States  feeds  must  be  so  labeled  as  to  show  the  guaranteed 
chemical  analysis  and  the  names  of  each  ingredient.  The  use  of 
harmful  or  deleterious  materials  is  generally  prohibited. 

The  results  of  feed  law  enforcement,  as  reported  by  the  different 
States,  indicate  that  the  great  bulk  of  the  feeds  wrhich  enter  into 
commerce  have  been  found  to  be  substantially  equivalent  to  the 
guaranty  under  which  they  have  been  sold.  A  comparison  made 
from  published  sources  by  the  Commission  of  the  extent  to  which 
the  straight  and  ready  mixed  feeds  varied  from  their  guaranteed 
chemical  analysis  showed  no  consistent  differences  in  the  average  per- 
centage of  deficiencies  and  overages  as  between  the  two  classes. 
Respectfully, 

HUSTON  THOMPSON,  Chairman. 

NELSON  B.  GASKILL. 

JOHN  GARLAND  POLLARD. 

VICTOR  MURDOCK. 

JOHN  F.  NUGENT. 


SUMMARY  OF  REPORT  ON  COMMERCIAL  FEEDS. 


The  inquiry  into  the  manufacture  and  sale  of  commercial  feeds 
for  animals  was  undertaken  pursuant  to  Senate  resolution  140, 
Sixty-sixth  Congress,  first  session,  which  reads  as  follows : 

Resolved,  That  the  Federal  Trade  Commission  be,  and  it  is  hereby,  instructed 
to  make  an  investigation  of  the  manufacture  and  sale  of  commercial  feeds  for 
animals ;  such  investigation  to  include  the  gathering  of  statistics  as  to  the 
supply  of  the  various  commodities  which  are  used  for  animal  feeds,  together 
with  the  fluctuation  in  the  prices  of  these  commodities,  the  extent  to  which 
these  commodities  are  converted  into  concentrated  food  by  manufacturers ; 
what  combinations  or  understandings,  if  any,  exist  between  the  feed  manu- 
facturers and  wholesale  feed  dealers  and  retail  feed  dealers ;  and  what  fraud, 
if  any,  is  practiced  by  dealers,  in  the  way  of  misbranding  or  using  inferior 
substitutes  in  mixed  feeds. 

Resolved  further,  That  the  Secretary  of  Agriculture  be,  and  he  is  hereby, 
directed  to  cooperate  with  the  Federal  Trade  Commission  in  this  investigation. 

DEVELOPMENT  OF  THE  INDUSTRY. — Commerce  in  animal  feeds  has 
grown  enormously  in  recent  years.  This  has  been  due  in  part  to  the 
greater  knowledge  of  feed  values  and  of  the  varied  requirements  of 
live  stock.  Many  of  the  feedingstuffs  now  widely  used  are  by-prod- 
ucts which  were  formerly  wasted.  Molasses,  corn  gluten  feed,  and 
flour-mill  by-products,  to  name  but  a  few,  are  some  of  the  by- 
products wrhich  were  at  one  time  burned,  run  into  streams,  or  buried 
for  want  of  a  better  means  of  disposing  of  them. 

The  scientific  feeding  of  animals  began  to  receive  serious  con- 
sideration in  the  United  States  during  the  period  1870  to  1880,  and 
since  then  has  steadily  grown  in  importance.  State  agricultural 
colleges  have  devoted  more  and  more  care  to  feeding  questions. 
Many  State  and  private  experimental  farms  conduct  tests  and  ex- 
periments with  various  feedingstuffs.  Dairy  farming  and  the  rais- 
ing of  all  kinds  of  live  stock  more  and  more  demand  scientific  man- 
agement in  feeding,  as  well  as  in  other  matters,  if  the  maximum  re- 
turn is  to  be  realized.  Although  rapid  progress  has  been  made  in 
recent  years,  nevertheless,  most  authorities  agree  that  much  is  yet 
to  be  learned. 

The  Federal  and  State  Departments  of  Agriculture,  the  agricul- 
tural colleges  and  other  authorities  render  valuable  assistance  to 
farmers  by  advice  on  feeding  problems,  especially  with  reference  to 
feed  values  and  mixing  their  own  rations.  The  extent  to  which 
farmers  use  ready-mixed  feeds  can  not  be  stated,  since  this  is  de- 
pendent upon  many  factors.  However,  the  use  of  mixed  feeds  has 
grown  tremendously  in  recent  years  and  appears  likely  to  continue. 
That  ready-mixed  feeds  have  a  place  is  now  undisputed.  They  serve 
a  beneficial  purpose  and  to  many  owners  of  animals  are  almost  a 
necessity.  Their  increased  use  has  been  due  largely  to  the  demand 
for  balanced  rations ;  the  increased  use  of  by-proclucts ;  the  shortage 


8  SUMMARY   OF   REPORT   ON    COMMERCIAL   FEEDS. 

of  farm  labor  and  desire  of  farmers  for  labor-saving  devices;  the 
growth  of  the  dairy  industry  on  small  farms  near  centers  of  popula- 
tion and  the  increase  in  raising  of  poultry  by  dwellers  in  cities ;  and 
finally  to  the  extensive  advertising  campaigns  of  the  manufacturers 
of  mixed  feeds. 

CLASSIFICATION  OF  FEEDING  STUFFS. — An  investigation  of  the  ani- 
mal feeds  industry,  to  be  complete,  involves  a  study  of  practically 
every  industry  which  uses  in  its  manufacturing  processes  vegetable 
material  and  some  which  use  animal  material.  The  by-products  of 
all  these  industries  supply  a  large  number  of  different  kinds  of 
feedingstuffs.  In  addition  to  these  feeds  there  are  numerous  others 
which  are  not  the  result  of  manufacturing  processes.  It  follows, 
therefore,  that  a  thoroughly  comprehensive  investigation  of  animal 
feeds  would  involve  a  study  of  the  manufacturing  processes  and  of 
results  in  a  large  number  of  industries  which  produce  as  by-prod- 
ucts, materials  suitable  for  feed.  Some  indication  of  the  ramifica- 
tions of  the  feedingstuffs  industry  may  be  appreciated  from  the  fol- 
lowing general  classification  of  feedingstuffs: 

1.  The  hays  and  straws. 

2.  The  whole  cereal  grains. 

3.  Cereal  mill  by-products. 

4.  Starch  and  glucose  by-products. 

5.  Brewery  and  distillery  by-products  and  yeast  and  vinegar  by- 
products. 

6.  Oil-mill  by-products. 

7.  Sugar  by-products. 

8.  Animal  and  fish  by-products. 

9.  Miscellaneous  feeds. 

10.  Commercial  mixed  feeds  or  proprietary  feeds. 

11.  Condi  mental  stock  remedies  or  tonics. 

The  American  Feed  Manufacturers'  Association  has  listed  over 
3,000  manufacturers  of  commercial  mixed  feeds  and  the  president  of 
this  association  has  stated  that  this  is  very  likely  less  than 
half  of  the  total  number.  As  a  result  of  the  foregoing  facts  it  will 
be  appreciated  that  anything  like  a  complete  survey  of  the  feeding- 
stuffs  industry  would  involve  an  enormous  expenditure  of  time  and 
money.  Under  these  circumstances  the  inquiry  was  confined  to  a 
study  of  the  representative  feedingstuffs  which  enter  into  commerce 
and  covers  the  period  from  1913  to  1920,  inclusive. 

PRODUCTION  OF  FEEDINGSTUFFS. — In  discussing  the  production  and 
supply  of  animal  feeds  the  numerous  feedingstuffs  which  do  not  enter 
into  commerce  must,  of  course,  be  considered.  Pasturage  and  grazing 
lands  are  very  important  factors  in  feeding  animals  and  the  condi- 
tion of  such  lands  affects  commerce  in  feeds  very  markedly.  It  was 
noted  that  in  the  fall  of  1920  pasturage  throughout  the  country  was 
far  better  than  usual  and  several  important  representatives  of  the 
feed  trade  stated  that  it  had  enabled  farmers  to  carry  their  stock  into 
the  winter  without  purchasing  as  much  feed  as  usual.  An  additional 
factor  was  the  low  price  of  corn,  causing  many  farmers  to  feed  their 
corn  rather  than  sell  it. 

Next  to  pasturage  in  importance  are  the  home-growTn  feeds,  such 
as  the  cereal  grains,  the  hays,  straws,  and  other  fodders  as  well  as 
ensilage.  By  far  the  greater  part  of  the  production  of  wheat,  rye, 


SUMMAKY   OF   REPORT   ON    COMMERCIAL   FEEDS.  9 

and  rice  is  handled  commercially.  In  the  case  of  the  hays  and  straws, 
while  there  is  considerable  commerce  in  them  they  are  largely  con- 
sumed where  grown.  This  is  also  true  of  corn,  oats,  and  barley. 

The  above  factors  affect  the  extent  to  which  farmers  purchase 
feeds.  While  the  total  value  of  pasturage  and  the  home-grown  feeds 
consumed  exceeds  that  of  the  feeds  sold,  the  latter  form  an  important 
factor  in  the  commerce  of  the  country  and  their  total  value  is  enor- 
mous, exceeding  a  billion  dollars  annually. 

Of  the  commercial  feedingstuifs — that  is,  the  feeds  which  enter 
into  commerce — the  hays,  straws,  and  whole  grains,  exceed,  both  in 
quantity  and  in  value,  the  total  of  all  the  other  kinds  of  commercial 
feedingstuifs,  including  mixed  feeds.  It  is  not  feasible  to  deter- 
mine the  exact  production  of  these  various  groups. 

Commerce  in  feedingstuffs  varies  greatly  between  the  different  sec- 
tions of  the  country  not  only  in  quantity  but  in  the  kinds  of  feeds 
purchased.  The  prairie  States  buy  large  quantities  of  the  high  pro- 
tein feeds  and  relatively  smaller  quantities  of  the  roughages,  while 
in  the  Eastern  States  it  is  necessary  for  many  farmers  to  buy  not 
only  the  high  protein  feeds  but  much  of  their  roughage.  This  situa- 
tion is  responsible  for  the  fact  that  the  best  market  for  mixed  feeds 
is  in  the  Eastern  States.  It  should  be  borne  in  mind,  however,  that 
farmers  and  feeders  of  to-day  do  not  as  a  rule  depend  entirely  upon 
home-grown  feeds.  It  is  realized  that  variety  in  a  ration  is  im- 
portant, and  for  this  reason  many  farmers  buy  concentrates  to  sup- 
plement their  home-grown  feedingstuffs,  while,  as  previously  stated, 
others  buy  practically  all  their  feed  requirements,  either  ready-mixed 
or  unmixed. 

The  number  of  feedingstuffs  is  so  large,  and  they  are  produced 
by  so  many  widely  scattered  concerns  that  it  was  not  to  be  expected 
that  entirely  satisfactory  production  statistics  could  be  secured. 
However,  the  production  of  the  more  important  feeds  was  deter- 
mined and  the  figures  are  presented  in  the  report.  Since  many  of 
these  feedingstuffs  are  by-products,  their  production  is  not  dependent, 
except  to  a  very  small  degree,  upon  the  demand  for  them,  but  rather 
upon  the  demand  for  the  main  or  primary  product.  Similarly  the 
price  of  most  of  these  by-product  feeds  depends  to  a  considerable 
extent  upon  the  demand  and  price  for  the  primary  products. 

During  a  part  of  the  period  covered  by  the  report  the  regulations 
of  the  United  States  Food  Administration  affected  the  production  of 
many  feedingstuffs  as  well  as  the  prices  at  which  numerous  feeds 
were  sold.  The  regulation  requiring  flour  millers  to  obtain  a  higher 
percentage  of  flour  than  normally,  reduced  considerably  the  pro- 
duction of  wheat  mill  feeds.  An  increase  in  the  production  of  oat 
hulls  resulted  from  the  regulations  requiring  the  use  of  wheat  sub- 
stitutes. 

The  work  of  agricultural  scientists  and  others  in  experimenting 
with  various  products  has  tended  to  increase  the  supply  of  animal 
feeds.  Thus,  in  the  manufacture  of  tin  plate  considerable  quantities 
of  wheat  middlings  are  used  to  absorb  the  palm  oil  through  which 
the  sheets  of  metal  are  passed  during  the  manufacturing  process. 
After  these  middlings  have  served  this  purpose  they  are  passed  over 
a  magnetic  field  to  remove  all  particles  of  metal,  and  the  middlings 


10  SUMMARY   OF    REPORT   ON    COMMERCIAL   FEEDS. 

are  then  sold  for  feed,  and  it  is  alleged  that  the  palm  oil  which  has 
been  absorbed  increases  the  feeding  value  of  the  middlings. 

Numerous  other  factors  influence  the  production  of  certain  feed- 
ingstuffs.  The  Volstead  Act  affected  the  production  of  brewery  and 
distillery  by-products.  In  1917  the  estimated  production  of  brewers' 
dried  grains  was  456,000  tons.  In  1918  the  estimated  quantity  pro- 
duced was  377.000  tons,  and  in  1919  the  estimated  production  was 
but  208,000  tons.  A  more  marked  decline  occurred  in  1920  when  the 
estimated  production  was  only  69,000  tons.  A  similar  decline  occurred 
in  the  production  of  malt  sprouts. 

The  use  of  beet  molasses  instead  of  cereals  in  the  manufacture  of 
yeast  has  resulted  in  a  decrease  in  the  production  of  dried  yeast 
grains.  In  1918  the  production  of  the  largest  yeast  manufac- 
turer in  the  United  States  was  over  25,000  tons,  and  in  1920  was 
estimated  to  be  about  12,000  tons.  It  is  probable  that  in  the  future 
the  production  of  this  by-product  will  be  practically  negligible. 

The  imports  of  cane  blackstrap  molasses  have  increased  steadily 
from  year  to  year.  In  1908  about  16,700,000  gallons  of  molasses 
(not  above  40°)  were  imported  from  Cuba,  the  chief  source  of 
supply.  In  each  succeeding  year  an  increased  amount  was  imported 
except  in  1919,  and  it  is  estimated  that  the  quantity  imported  from 
Cuba  during  the  first  eleven  months  of  1920  was  150,000,000  gallons. 

Practically  the  entire  quantity  of  cane  blackstrap  molasses  im- 
ported into  and  produced  in  the  United  States  is  used  in  the  manu- 
facture of  alcohol  or  as  a  feed  for  animals.  The  division  of  the 
supply  between  these  two  uses  differs  greatly  at  times,  depending  on 
various  factors  such  as  the  relative  price  of  molasses  and  other  raw 
materials  for  alcohol  manufacture,  particularly  corn. 

Several  other  important  feedingstuffs  may  also  be  used  for  pur- 
poses other  than  feeds.  Cottonseed  meal,  tankage,  and  fish  scrap 
are  frequently  used  for  fertilizer,  although  in  recent  years  such  use 
has  decreased.  It  is  therefore  difficult  to  determine  exactly  the  ex- 
tent to  which  these  commodities  are  used  as  animal  feeds.  However, 
it  is  possible  to  give  estimates  of  the  quantities  so  used  which  are 
satisfactory  for  all  practical  purposes. 

A  number  of  feedingstuffs  are  rarely  used  by  farmers  as  ingredi- 
ents in  home-mixed  rations.  Practically  the  entire  quantity  of  such 
commodities  used  as  feeds  therefore  enters  into  mixed  feeds.  Among 
this  group  are  flax  plant  by-product  and  clipped  oat  by-product. 
Other  commodities  are  used  in  large  quantities  both  as  part  of  home- 
mixed  rations  and  as  ingredients  in  mixed  feeds.  The  oil-mill  by- 
products, corn  gluten  feed  and  dried  beet  pulp,  are  examples  of  this 
class.  Other  feedingstuffs,  such  as  wheat  bran,  while  widely  used 
as  ingredients  in  ready-mixed  feeds,  are  more  extensively  used  by 
farmers  in  mixing  their  own  rations. 

The  quantities  of  the  various  feedingstuffs  which  are  used  by 
mixed-feed  manufacturers  could  not  be  determined,  even  with  a  fair 
degree  of  accuracy,  without  the  expenditure  of  time  and  money 
entirely  out  of  proportion  to  the  value  of  any  results  which  might 
have  been  secured. 

PRICES  or  FEEDINGSTUFFS. — The  study  of  the  prices  of  feeds  is 
attended  with  considerable  difficulty.  In  particular  the  comparison 
of  the  prices  of  commercial  mixed  feeds  with  one  another,  or  with 


SUMMARY   OF   REPORT   ON    COMMERCIAL   FEEDS.  11 

the  prices  of  the  straight  feeds  from  which  they  are  made,  is  difficult. 
This  will  readily  appear  when  the  great  number  of  ingredients  which 
enter  into  many  brands  of  mixed  feeds  are  considered,  and  also  the 
very  frequent  changes  in  formulas  of  many,  if  not  most,  of  these 
feeds.  Hence  no  such  precision  is  to  be  looked  for  in  conclusions 
derived  from  a  study  of  prices  of  these  feeds  as  is  possible  in  the 
study  of  prices  of  fairly  homogeneous  commodities. 

Prices  of  all  kinds  of  feeds,  both  straight  and  ready-mixed,  in 
common  with  the  prices  of  practically  all  other  commodities,  in- 
creased greatly  during  the  war  period  and  for  more  than  a  year  and 
a  half  following  the  armistice.  Most  feeds  reached  their  highest 
prices  in  May  or  June,  1920.  There  were  naturally  considerable 
differences  in  the  movement  of  prices  of  different  feeds,  due  to  their 
great  variety  and  the  different  sources  from  which  they  are  derived, 
there  being  at  times  a  plentiful  supply  of  some  feeds  and  a  scarcity 
of  others.  Demand,  too,  naturally  fluctuates,  but  the  price  of  every 
feed  depends  in  some  measure  on  the  prices  of  other  feeds,  on  account 
of  the  relative  ease  with  which  one  feed  can  generally  be  substituted 
for  another. 

One  of  the  most  important  influences  affecting  prices  during  the 
war,  and  much  of  the  time  since  the  armistice,  has  been  the  shortage 
of  freight  cars,  which  has  not  only  delayed  shipments  of  finished 
products,  but  often  held  up  receipts  of  raw  materials.  At  times  this 
shortage  has  been  acute,  and  has  caused  decreased  production.  This 
condition,  of  course,  has  not  been  peculiar  to  the  feed  business. 

The  wholesale  prices  of  10  important  straight  feeds  and  12  com- 
mercial mixed  feeds,  which  may  be  considered  representative  of  these 
two  classes,  were  compared  with  the  composite  Avholesale  prices  of 
a  group  of  32  farm  products  and  with  a  group  of  "  all  commodities," 
as  registered  by  index  numbers  compiled  by  the  Bureau  of  Labor 
Statistics  of  the  Department  of  Labor.  These  index  numbers  give 
the  prices  of  these  groups  of  commodities  by  months  and  years  rela- 
tive to  the  average  price  of  the  year  1913  taken  as  a  base.  Composite 
index  numbers  were  also  computed  for  the  group  of  10  representa- 
tive straight  feeds  and  the  group  of  12  commercial  mixed  feeds. 

A  comparison  of  these  different  series  of  index  numbers  shows 
that  the  price  of  all  commodities  in  1919  was  represented  by  212  as 
compared  with  the  base  price  of  100,  or  the  average  price  of  the  year 
1913.  The  other  index  numbers  for  the  year  1919  were  as  follows : 
Farm  products,  234;  straight  feeds,  236;  ready-mixed  feeds,  220. 
There  was  a  very  close  correspondence  in  the  relative  prices  of  the 
mixed-feeds  group,  the  farm-products  group,  and  also  a  close  cor- 
respondence in  most  of  the  years  between  the  latter  and  the  straight- 
feeds  group.  The  relative  advance  in  prices  from  1913  to  1919  in  the 
two  classes  of  feeds  and  also  in  farm  products  was  considerably  higher 
than  the  advance  in  all  commodities. 

The  prices  of  feeds  as  well  as  of  "all  commodities"  continued  to  ad- 
vance during  the  first  half  of  1920,  but  the  second  half  of  the  year 
was  marked  by  a  very  great  decline  in  the  prices  of  all  feeds,  both 
straight  and  ready  mixed.  The  decline  between  June  and  Decem- 
ber was  as  much  as  57  per  cent  for  some  of  the  straight  feeds.  Dif- 
ferent brands  of  mixed  feeds  declined  in  price  from  20  per  cent  to 
more  than  50  per  cent. 


12  SUMMARY   OF   REPORT   ON    COMMERCIAL   FEEDS. 

So  far  as  general  conclusions  can  be  drawn  from  the  study  of  the 
statistics  of  feed  prices  the  figures  do  not  indicate  a  disproportionate 
rise  in  these  prices  as  compared  with  farm  products  in  general. 

COSTS,     PROFITS,    AND    RETURN     ON     INVESTMENT     OF     REPRESENTATIVE 

MIXED-FEED  MANUFACTURERS. — A  study  of  the  costs  and  profits  of  a 
representative  group  of  nine  mixed-feed  manufacturers  during  1915- 
1919  shows  that  during  the  period  costs  of  materials  about  doubled, 
while  with  few  exceptions  all  other  items  of  manufacturing  costs 
and  expenses  increased  in  about  the  same  proportion.  Since  the 
average  cost  of  raw  materials  for  the  period  1915-1919.  inclusive, 
was  about  83  per  cent  of  the  commercial  cost  of  sales,  and  about  80 
per  cent  of  the1  selling  price,  this  would  indicate  that  by  far  the 
largest  factor  causing  the  high  prices  of  ready-mixed  feeds  in  1919 
was  the  great  increase  in  the  cost  of  raw  materials. 

The  net  operating  profit  of  these  mixed-feed  manufacturers  was 
sufficient  to  yield  a  fairly  high  rate  of  return  on  the  investment  in 
each  year,  while  in  1917  and  1919  the  rate  of  return  was  considerably 
larger,  due  probably  in  part  to  the  fact  that  in  these  two  }^ears  the 
net  operating  profit  included  some  profit  realized  from  an  increase 
in  value  of  raw  materials  during  their  period  of  conversion  into  mixed 
feeds.  The  average  rate  of  return  for  the  period  1915-1919  was  18.77 
per  cent.  The  percentages  represent  the  profits  on  the  total  invest- 
ment employed  in  the  business,  which  includes  borrowed  capital.  The 
rates  of  return  would  be  greater  on  the  capital  stock  and  surplus, 
which  is  the  net  investment  of  the  companies. 

COMPETITIVE  CONDITIONS. — On  the  whole,  competition  in  this  indus- 
try is  very  active.  This  is  natural  in  an  industry  which  includes 
so  many  different  products  and  such  a  large  number  of  widely 
scattered  manufacturers.  The  various  straight  feeds  not  only  com- 
pete with  one  another  to  a  greater  or  less  extent  but  also  with  the 
ready-mixed  feeds,  and  both  these  feeds  must  compete  with  the 
home-grown  feedingstuffs.  This  competition  tends  to  keep  the  prices 
of  ready-mixed  feeds  and  straight  feeds  in  line  with  one  another 
on  the  basis  of  their  feed  utility.  The  possibility  of  home  mixing 
and  the  wide  variety  of  commodities  which  may  be  substituted  for 
one  another  in  any  mixed  feed  tends  in  no  small  degree  to  prevent 
unreasonable  prices  and  probably  also  to  prevent  attempts  on  the 
part  of  producers  of  feedingstuffs  to  organize  and  combine  to  obtain 
price  control. 

It  is  true  that  prices  were  discussed  by  members  of  the  American 
Feed  Manufacturers'  Association  at  or  immediately  following  certain 
meetings  of  the  executive  committee.  In  1919  an  attempt  was  made 
by  certain  members  of  this  association  to  organize  a  bureau  which 
seems  to  have  had  price  fixing  as  an  object,  but  this  organization  was 
never  completed.  Although  a  careful  examination  was  made  of  the 
correspondence  files  of  various  associations  in  the  feedingstuffs  in- 
dustry, and  of  a  number  of  important  feed  manufacturers,  no  indica- 
tion was  found  of  any  concerted  action  to  advance  prices.  While  the 
discussions  of  prices  above  referred  to  may  have  tended  to  advance 
prices,  no  evidence  was  found  to  establish  this.  On  the  whole,  as 
already  stated,  the  evidence  obtained  in  the  inquiry  indicates  a  very 
sharp  competition  in  the  manufacture  and  sale  of  feedingstuffs. 


SUMMAKY   OF  REPORT   ON   COMMERCIAL  FEEDS.  13 

The  distribution  of  three  important  feed  commodities,  corn  gluten 
feed,  cane  blackstrap  molasses,  and  dried  beet  pulp,  is  in  each  case  in 
the  hands  of  a  few  concerns.  This  does  not  appear,  however,  to  ex- 
clude competition  in  these  commodities,  nor  does  there  appear  to  be 
any  collusion  or  combination  between  the  manufacturers  in  any  one 
of  the  three  groups. 

TRADE  PRACTICES. — A  number  of  manufacturers  grant  overages, 
i.  e.,  a  commission  to  old  dealers  on  feeds  sold  to  new  dealers  in  the 
former's  territory.  It  is  possible  that  this  may  be  a  price  discrimi- 
nation, and  the  Commission  has  taken  steps  to  determine  whether  it 
is  in  violation  of  section  2  of  the  Clayton  Act  or  section  5  of  the 
Federal  Trade  Commission  Act. 

The  use  of  alternate  or  different  brand  names  for  the  same  feed 
may  be  unfair  unless  the  use  of  such  alternate  brands  is  fully  under- 
stood by  the  dealer  and  the  consumer.  In  any  case  it  leads  to  an 
undue  multiplication  of  brands  and  it  is  questionable  whether  it  is 
desirable  from  an  economic  standpoint. 

Many  feed  manufacturers  sell  their  goods  guaranteed  against  price 
decline,  although  a  majority  of  them  believe  the  practice  should  be 
stopped.  Another  trade  practice  which  most  manufacturers  con- 
demn and  yet  many  indulge  in,  is  that  of  long-time  contracts.  Both 
of  these  practices  are  due  to  competition.  In  an  effort  to  do  away 
with  them  members  of  the  American  Feed  Manufacturers  Associa- 
tion passed  resolutions  to  the  effect  that- the  practices  should  be  dis- 
continued. However,  these  resolutions  did  not  have  the  desired 
result. 

DISTRIBUTION  OF  FEEDS. — Animal  feeds  reach  the  consumer  through 
a  system  of  distribution  similar  to  that  of  other  food  products. 
Practically  every  manufacturer  makes  use  of  the  retail  feed  dealer 
and  in  some  sections  of  the  country  farmers'  cooperative  organiza- 
tions engage  in  this  business.  Most  manufacturers  also  are  willing 
to  make  direct  sales  provided  the  purchaser  is  financially  responsible. 
In  such  cases  the  manufacturers  frequently  allow  a  commission  to  the 
local  retail  dealer,  although  he  may  have  performed  no  service. 
While  the  Eastern  Federation  of  Retail  Feed  Merchants  is  opposed 
to  direct  sales  to  consumers  by  manufacturers,  a  careful  examina- 
tion of  this  association's  records  did  not  indicate  that  it  resorted, 
either  directly  or  indirectly,  to  boycott  or  threats  of  boycott  as  a 
means  of  preventing  direct  selling. 

LOW-GRADE  FEED  PROBLEM. — There  is  a  great  lack  of  authoritative 
data  in  regard  to  many  phases  of  the  industry  and  there  are  numer- 
ous questions  which  are  highly  controversial.  This  is  particularly 
the  case  with  reference  to  the  feed  value  of  certain  products  com- 
monly known  as  roughages  or  low-grade  feeds.  It  is  contended  by 
some  agricultural  authorities  and  a  few  feed  manufacturers  that 
the  use  of  certain  of  these  low-grade  feedingstuffs  should  be  re- 
stricted, since,  it  is  alleged,  these  feedingstuffs  are  roughages  of 
which  farmers  produce,  or  should  produce,  an  abundance.  It  should 
be  pointed  out,  however,  that  in  some  sections  of  the  country  farmers 
do  not  produce  sufficient  roughages  to  meet  their  requirements.  It 
is  also  frequently  alleged  that  mixed  feeds  containing  one  or  more 
of  such  low-grade  ingredients  are  sold  at  prices  out  of  line  with  their 


14  SUMMARY   OF   REPORT   ON   COMMERCIAL   FEEDS. 

feed  value.  A  number  of  plans  have  been  suggested  to  restrict  the 
use  of  these  commodities,  the  most  common  one  being  the  proposal 
to  require  the  statement  on  tags  and  labels  of  the  percentage  of  each 
ingredient  used.  However,  important  objections  have  been  offered 
against  the  adoption  of  such  a  requirement,  nor  is  it  certain  that 
it  would  achieve  the  result  desired.  It  should  be  pointed  out  in  con- 
nection with  the  foregoing  that  much  of  the  agitation  over  the  use 
of  some  of  these  low-grade  feedingstuffs  is  based  on  selfish  grounds 
and  is  due  largely  to  competition  between  manufacturers  of  mixed 
feeds. 

Before  this  controversy  over  the  low-grade  feeds  can  be  definitely 
and  satisfactorily  settled  a  series  of  exhaustive  tests  should  be  under- 
taken with  these  low-grade  feeds  and  probably  combinations  of 
these  low-grade  feeds  with  certain  high-grade  feeds.  Such  tests 
should  be  made  by  a  disinterested  body,  preferably  the  United  States 
Department  of  Agriculture. 

GUARANTEED  CHEMICAL  ANALYSIS. — At  the  present  time  most  States 
require  that  feedingstuffs  be  sold  under  a  guaranteed  chemical  anal- 
ysis, showing  the  minimum  amount  of  crude  protein,  the  minimum 
amount  of  crude  fat,  the  maximum  amount  of  crude  fiber,  and  in 
some  States  the  total  carbohydrates  contained  in  the  feed.  In  addi- 
tion to  the  chemical  analysis  most  States  require  that  feeds  offered 
for  sale  shall  have  attached  thereto  tags  or  labels  showing  the  name 
of  each  ingredient  in  the  feed. 

The  chemical  analysis  has  come  to  be  widely  recognized  as  an 
index  or  measure  of  the  value  of  a  feedingstuff.  However,  such  use 
of  the  guaranteed  chemical  analysis  is  held  to  be  unwise  by  most 
scientists  and  manufacturers.  For  example,  it  has  been  determined 
that  there  are  several  kinds  of  protein  and  that  these  proteins  differ 
both  in  digestibility  and  in  other  qualities.  Consequently  merely 
to  state  that  a  feed  contains  given  percentages  of  protein,  fat,  and 
fiber  does  not,  it  is  maintained,  tell  the  complete  story.  However, 
in  spite  of  the  insufficiency  of  the  chemical  analysis  as  a  standard, 
it  is  the  one  most  frequently  used,  and  apparently  must  suffice  until 
scientists  have  developed  a  better  one. 

REGULATION. — With  the  growth  of  commerce  in  feedingstuffs  va- 
rious forms  of  fraud  and  deceit  began  to  be  practiced  by  manufac- 
turers of  and  dealers  in  these  commodities.  These  practices  were 
responsible  for  the  enactment  of  laws  regulating  commerce  in  feeds. 
The  first  feed  law  was  enacted  by  Connecticut  in  1895,  and  shortly 
thereafter  other  States  also  enacted  statutes  on  this  subject,  until 
at  the  present  time  practically  all  States  have  regulated  commerce 
in  feedingstuffs.  The  few  States  which  do  not  have  specific  feed 
laws  are  those  in  which  commerce  in  feeds  is  small.  The  statutes 
of  most  States  are  quite  uniform  in  their  essential  provisions,  al- 
though there  is  such  a  difference  in  some  requirements,  particularly 
registration  of  brands,  as  to  cause  manufacturers  considerable  diffi- 
culty in  meeting  the  requirements.  A  few  State  laws  differ  markedly 
from  the  majority  in  that  they  require,  under  certain  conditions,  the 
statement  of  the  percentage  of  each  ingredient  in  a  feed.  In  addi- 
tion to  the  various  State  regulations  the  Federal  Food  and  Drugs  Act 
of  1906  is  applicable  to  feeds  for  animals. 


SUMMARY   OF   REPORT   OX    COMMERCIAL   FEEDS.  15 

The  State  and  Federal  authorities  in  charge  of  enforcing  feed 
laws  have  formed  an  association  known  as  the  Association  of  Feed 
Control  Officials  of  the  United  States,  which  has  served  to  bring 
about  more  uniformity  in  matters  pertaining  to  feed  regulations. 
These  officials  adopted  the  policy  of  publicity  in  respect  to  fraudulent 
practices.  For  example,  as  early  as  1898  Massachusetts  issued  a  bul- 
letin regarding  the  inspection  of  feedingstuffs  in  that  State.  This 
bulletin  contained  advice  to  farmers  regarding  feeding  matters,  and 
cautioned  them  against  the  use  of  certain  feeds. 

The  results  of  feed-law  enforcement,  as  reported  by  the  different 
States,  indicate  that  the  great  bulk  of  the  feeds  which  enter  into 
commerce  have  been  found  to  be  substantially  equivalent  to  the  guar- 
anties under  which  they  have  been  sold.  A  comparison  made  by  the 
Commission  from  published  sources  of  the  extent  to  which  the 
straight  and  ready-mixed  feeds  varied  from  their  guaranteed  chemi- 
cal analyses  showed  no  consistent  differences  in  the  average  percent- 
age of  deficiencies  and  overages  as  between  the  two  classes. 

It  is  undoubtedly  a  fact  that  the  enactment  and  enforcement  of 
feed  laws  has  resulted  in  great  improvement  so  far  as  fraudulent 
practices  are  concerned.  There  are  being  found  to-day  comparatively 
few  cases  where  feedingstuffs  have  been  adulterated  with  substances 
considered  deleterious  or  as  having  practically  no  nutritive  value. 

o 


PAT.JAN.21.190C 


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